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Big Changes In Benefits

Kevin Calliham works full time as a machine maintenance technician at an Eaton Corp. hydraulics parts plant in Greenwood, S.C. But he doesn't work for a manufacturer.

Jim Fornango retired from Monsanto Corp. in 1996, but recently he's been working on a new manufacturing plan for the agricultural products company's RoundUp herbicide.

Both employees represent a changing workforce in the United States that in the coming years will become even more diverse and more unlike the traditional troops who have worked in U.S. manufacturing since the Industrial Revolution.

An aging population and other demographic facts-of-life as well as larger political and competitive pressures dramatically will alter both the availability of skilled labor for manufacturers and the relationships between manufacturing employers and employees in the near future.

Benefits will be affected -- and to a greater degree than is generally recognized. As large, global manufacturers demand more flexibility in capacity and outsourcing decisions, workers want more benefits that will improve their current and future quality of life: adequate health-care insurance, training, flexible schedules, new avenues for advancement and greater opportunities to learn new skills. Make no mistakes, experts say: Gone are the old paradigms of employees-for-life, good-guy-versus-bad-guy union battles, company towns and an abundant pool of qualified employees whose main concern is a weekly paycheck and company-paid pension. U.S. manufacturing is changing, and both employers and employees must respond. >

Tapping Into Contractors, Retirees

Outsourcing is expected to have an immense influence on plant relations as manufacturers focus on core competencies and attempt to maximize current assets.

In the case of Cleveland-based Eaton Corp., the outsourcing of machine maintenance at its Eaton Fluid Power plant in South Carolina was a win-win because the company increased machine efficiency while still having access to valuable skilled workers such as 41-year old Kevin Calliham.

When the plant outsourced machine maintenance last year, Calliham decided he would work for the contractor, Advanced Technology Services Inc. (ATS).

What ATS benefits most appealed to him? Health insurance and job security. "We are growing very rapidly in the south," says Calliham. "And the health-care plan means the most to me. I am married with three kids, so this is very important to me."

Of course, Eaton offers health insurance to employees, but other benefits -- such as training and opportunities to improve his skills and advance -- also prompted Calliham to move from payrolled employee to contractor.

"With Eaton, it was all fire fighting, just keeping-the-machines-running type of maintenance. With ATS, all [performance measures] are in place, charting of each machine, up time and down time and root cause of machine failure. This type of maintenance takes care of the old fire fighting.

"My job as team leader is to help the site supervisor with day-to-day work orders, ordering parts and helping my team members as needed. My next step with ATS would be site supervisor and to be a much stronger technician."

Calliham's experience illustrates that just because a company or plant outsources one or more functions, it can't forget about how those employees are compensated. A contractor such as ATS that provides extensive opportunities for training and advancement as well as adequate standard benefits such as health care is likely to provide contract employees who are more satisfied and motivated and therefore, more productive.

"We give maintenance people and skilled tradespeople a fast track to management that they wouldn't get in a traditional manufacturing setting," says Jeff Owens, president of ATS, formerly a joint venture of Caterpillar Inc., Peoria, Ill.

Owens says that when ATS became independent a decade ago, the company had a hard time convincing manufacturing executives that outsourcing machine maintenance would benefit them. Today the market is worth $53 billion. Owens says growth has been rapid the past three years, and the company is planning for more growth.

With 1,300 employees, it sees training as a key to preparing for ongoing demand. All ATS employees must train formally -- not on the job -- a minimum of 20 hours a year.

As the baby boom generation reaches retirement age, manufacturers face en masse losses of valuable employees. Some companies, however, are re-hiring retired employees on a part-time basis. One thing that's allowing this is a desire on the part of retirees to keep working.

"The days of reaching the magic age and quitting the workforce cold turkey are gone," says Bob Morison, executive vice president of The Concours Group, Kingwood, Texas. "We asked people when they plan to retire, and 34% said they don't plan to retire."

Morison is referring to a 2003 study and resulting report entitled "Demography is Destiny." The study showed that only one-third of workers want to fully stop working upon retirement.

"We're moving into a period of time where people want to keep on working," Morison says. "What they run into is that the schedule of pensions and various IRS regulations get in the way of doing that. In some cases you make it easier for people to retire and go somewhere else to work rather than keeping them on the payroll.

"Corporations have to find a way to keep employees who are motivated to stay on the payroll, returned to the payroll after they retire."

St. Louis-based Monsanto, with $5.5 billion in sales in fiscal year 2004, has found a way. It currently has 300 retirees enrolled in a program called Resource Re-entry, which allows retirees and other former employees to continue working at the company. The program benefits employees by providing a transition to full-time retirement for some and an opportunity to remain active for others. For Monsanto, the benefits are the retention of intellectual property and skilled workers and the creation of a pool of prequalified temporary employees that increases workforce flexibility.

"The group was put in place several years ago in order to improve the quality and standardize the costs of temporary labor," says Ben Kampelman, a public affairs associate with Monsanto. "We wanted to match interested retirees and former employees with current temporary assignments -- and it has proven to be an effective alternative resource for staffing temporary positions at Monsanto."

For Jim Fornango the program fits perfectly into his lifestyle now that he's retired from his systems engineering job.

"The way it is run at Monsanto, it's very flexible and informal, so it fits a retiree's new attitude toward life. You are not full time and you are not part time. It's up to you and your supervisor."

In addition to the RoundUp project, Fornango, 61, is working as a business analyst on a project aiming to improve soybean oil. He says he likes making the money, likes the interesting assignments and likes the flexibility. In addition, ". . . everyone seems to realize that we [retirees] have a lot to offer. It's part of the culture."

Fornango works 30 to 40 hours a week depending on what else he has planned, including occasional volunteer work for a gifted program at a local school.

"I don't consider myself an old guy," he says. "This is a continuation of a career."

Benefits That Count

So how should a manufacturer review its benefits and rewards packages to ensure it will attract and help keep needed skilled employees?

According to Stephen J. Cabot, a labor relations and employment law attorney at mid-Atlantic firm Saul Ewing LLC, if most rewards are based on time served rather than performance, you're out of date.

"You have the Hondas and Toyotas and Sonys of the world showing how to do it, and the difference is an absence of seniority culture and an increased presence in flexibility."

He recalls that at one point Bethlehem Steel, which filed for bankruptcy and was acquired by International Steel Group in 2002, offered an entire year's seniority-based sabbatical to production employees on top of an extremely generous sick leave and vacation package. And, this was in an environment where job duties were highly defined and therefore lacked flexibility.

"Basically, as long as you could breathe and had seniority, you had a job," he says of the "old ways" in manufacturing.

Seniority-based bonus vacation, sick leave and totally free health-care are being scaled back in the modern manufacturing setting, but bonus benefits such as cash payments for reaching certain goals are becoming more common, Cabot says. It's better for manufacturers because benefits are tied directly to more productive hours of employment.

Although much of Cabot's work these days focuses on the issue of plant unionization, he advises manufacturers that when it comes to benefits they shouldn't set a goal of being union-free. "Rather, set your goal as being the employer of choice. It's all about strategy. Do you have a labor plan in your business plan? If people feel the company cares about them, they are going to say, 'Why do I need a union?' "

Cabot says getting a workforce to embrace a company's goals requires communication and training. It can't be done without those.

"Companies must see that their most important asset is their people. The management might have a Phi Beta Kappa mentality, but if your people don't buy into it, you can't implement it."

Morison says one area employers might miss in terms of benefits is the need for continuous education. As the workplace model changes, employees want more opportunities to learn and improve themselves. They, too, realize that the job-for-life model is a dying one.

"There are a lot of mid-career employees we found who would be very eager for a career change, a fresh assignment. Find out who you want to keep for the long-term and provide some career regeneration services," Morison advises. "It's important to keep workers engaged. The things that matter most are not the things you spend money on, but things that make the work rewarding and engaging."